Economists at the Fed work hard to maintain the institution’s reputation as a solid economic pillar – unaffected by politics or the whims of the day, know-it-all and important most effective. This image obsession serves an important purpose: The credibility of the central bank depends on Americans believing it… trustworthy.
The Fed, like Madonna, is constantly evolving. This organization aims to create an aura of stability that doesn’t come as a surprise to us.
The Fed as we know it gradually moves interest rates up and down at pre-designated meetings. They explain their decision-making to as much communication as possible and produce their economic projections to let Americans know what’s going to happen in the future.
That was not the case in 1980, when inflation spiked to 14.6%, the highest on record.
Under the leadership of Paul Volcker, Fed officials sharply raised and cut the benchmark interest rate at unscheduled meetings without corresponding policy statements. The funds rate on offer didn’t have the tight target range it has today – it regularly spans 5 percentage points. It wasn’t until Alan Greenspan came to power in the 1990s that the Fed began to adjust interest rates at FOMC meetings, and it wasn’t until the 2000s that the central bank began tightening and easing rates accordingly. cycle.
Major changes also occurred in 2008 under the leadership of Ben Bernanke. That’s when the Fed responded to the Great Recession by enacting a policy that was previously unbelievable: Interest rates fell 100 basis points to near zero. They remained there until 2015.
Christopher Leonard, author of The Lords of Easy Money, an upcoming book on the history of the Fed, said the actions were “experimental and unprecedented”. “They pushed the boundaries.”
Brian Rehling, head of Global Fixed Income Strategy at Wells Fargo Investment Institute, said the Fed today has undergone a “huge shift towards transparency and trying to communicate clear policy to does not surprise the market”. They are more transparent in their goals and policy setting. Additionally, Powell’s impact on the annals of monetary policy remains undetermined.
Mr. Reinhart said Powell appeared to be loosely adhering to the monetary policy set forth by Volcker during the high inflation days of the 1980s, but each chair had to play to its own strengths. He said: “Greenspan can get into the data. Volcker has personal authority on his understanding of the market and the bank. Powell seems to be interested in speaking out simply; he has shifted the focus. The Fed’s focus and attention is on all Americans rather than just economists and investors, he added.
But the central bank will face a new set of challenges as “the economy doesn’t feel as good and inflation has yet to return to its target level,” Rehling said. Powell will have to decide whether the Fed will continue on its hawkish rate hike path in the face of political pressure and public opinion about the state of the economy as a whole. Maybe that’s when the Fed will enter the ‘Material Girl’ era.
The FOMC is meeting in Washington next week and many are expected to announce another rate hike to 75 basis points.
Happy 13th birthday with a minimum salary of $7.25
July 24 marks 13 years since the last time the US federal minimum wage was raised, to $7.25 an hour. It is also the longest period without a raise since the federal minimum wage was enacted in 1938.
Even as historically high inflation rates eroded the strength of US wages and headlines focused on a tightening labor market, the rate is $7.25, or $15,080. a year for a full-time job, still intact.
Holly Sklar, Executive Director of Business for A Fair Minimum Wage, said: “Every day without a raise is another day the minimum wage is below the cost of living.
According to the EPI, a minimum wage worker is now taking home 27.4% less than in July 2009 and 40.2% less than in February 1968 when adjusted for inflation.
About 30 states and Washington DC have higher minimum wages than the federal standard. Five states have not yet adopted a state minimum wage: Alabama, Louisiana, Mississippi, South Carolina, and Tennessee. Georgia and Wyoming have a minimum wage of less than $7.25 an hour. In all seven of these states, the federal minimum wage of $7.25 an hour applies.
Next
Monday: Chicago Fed National Activity Index for June
Tuesday: Microsoft, Alphabet, Coca-Cola and McDonald’s report earnings
Wednesday: Fed rate decision and FOMC press conference; Meta and Boeing report earnings
Thursday: Apple, Amazon and Pfizer report earnings
Friday: Exxon Mobile and Chevron report earnings
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